TFSA...What? Another texting acronym? No, a TFSA is a Tax-Free Savings Account. According to News Canada, at the end of 2009, over 4.8 million Canadians had opened a TFSA. Yet, I didn't even know about it. [caption id="" align="aligncenter" width="300" caption="Image via Wikipedia."][/caption] Here's what you need to know:
- It's free! It's also commitment-free and a great tool for saving and investing your money. Discuss your specific goals – whether they're short or long-term – with your financial adviser.
- Your annual TFSA limit is $5,000. Be careful not to over-contribute. You will be charged tax on any amount you contribute over your available annual contribution room. Your unused contribution room can be carried forward to the next year.
- You can keep cash or you can buy a variety of investments inside a TFSA. Consider bonds, stocks, mutual funds and GICs.
- Contributions to a TFSA are not deductible for income tax purposes.
- Any amount you've withdrawn from the previous year also counts toward your contribution room for the following year.
- The Canada Revenue Agency is the best source for more specific information. Visit Canada Revenue Agency or call 1-800-959-8281.